Money supply at its weakest in four years

BRITAIN&rsquo;S broad money supply (M4) contracted in June by 0.2 per cent, the weakest reading since June 2005, figures from the Bank of England showed yesterday, putting a question mark over the effectiveness of the Bank&rsquo;s quantitative easing (QE).<br /><br />The data showed the supply of broad money fell by &pound;3.2bn last month and the annual growth fell to 14.2 per cent from 16.7 per cent in May.<br /><br />Despite a rise in the monetary base &ndash; banks&rsquo; reserves plus notes and coins in circulation &ndash; to &pound;200bn from &pound;76bn before the start of QE, the annual growth of total M4 lending dropped in June to 11.2 per cent from 13.7 per cent in May.<br /><br />The Bank&rsquo;s separate July Trends in Lending report also showed that the flow of net lending to UK businesses remained negative in May, falling by &pound;3.4bn.<br /><br />Net flows of consumer credit were also weak in May, while none of the major lenders planned to expand the availability of consumer credit.